Open-Ended Fund Company (OFC fund)

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Hong Kong is a mature, reputable fund hub with 2,000+ SFC-authorised public funds available to investors. Historically, most locally domiciled funds were set up as unit trusts (trust deed with a trustee), while many corporate funds (mutual fund style) seen in Hong Kong were overseas domiciles recognised by the SFC. HKEX has even launched a one-stop Fund Repository for all SFC-authorised funds to improve transparency for the public.

Within this landscape, Hong Kong now offers a home-grown corporate vehicle—the Open-Ended Fund Company (OFC)—which complements unit trusts and provides a familiar corporate option aligned with US/EU practice.

What Is an Open-Ended Fund Company (OFC)?

An Open-Ended Fund Company (OFC) is a specialised corporate fund vehicle introduced by the Hong Kong Securities and Futures Commission (SFC) in 2018. It combines the features of a company limited by shares with the flexibility of an open-ended fund structure, allowing investors to subscribe for and redeem shares without the restrictions that apply to conventional companies. The OFC regime was further enhanced in 2021 to allow OFCs to invest in private companies, broadening its appeal for private equity and venture capital funds.

What Are the Key Features of an OFC?

Variable Capital: Unlike conventional Hong Kong companies, OFCs can issue and redeem shares based on investor demand. Share capital can increase or decrease without shareholder approval for each transaction, providing the flexibility required for fund operations. Corporate Structure: An OFC is a legal entity separate from its investors, providing limited liability protection. It has a board of directors responsible for overall management and an investment manager responsible for investment decisions. SFC Supervision: OFCs are regulated by the SFC, providing investor confidence and regulatory oversight. Public OFCs require SFC authorisation, while private OFCs must be incorporated with SFC but do not require authorisation for public offering. Tax Exemption: OFCs benefit from the Unified Fund Exemption under Section 20AM of the Inland Revenue Ordinance, provided they meet the qualifying conditions. This means most investment income is exempt from Hong Kong profits tax. Government Subsidy: The Hong Kong government offers a subsidy scheme capped at HK$300,000 per public OFC and HK$150,000 per private OFC, limited to one OFC per investment manager.

Who Should Consider Setting Up an OFC?

Filings & approvals

OFCs are suitable for:

Asset Managers seeking a Hong Kong-domiciled fund vehicle for SFC-licensed fund management activities
Private Equity & Venture Capital Funds — particularly following the 2021 amendments allowing OFCs to invest in private companies
Family Offices looking for a regulated, transparent structure for multi-generational wealth management
Hedge Funds that require frequent subscription and redemption flexibility
ESG and Impact Funds leveraging Hong Kong's growing sustainable finance ecosystem

What Is the OFC Incorporation Process?

CityLinkers guides you through the complete OFC establishment process:

Feasibility Assessment — Evaluating whether the OFC structure is optimal for your fund strategy
SFC Pre-Application — Submitting the incorporation application to the SFC, including the proposed constitution, investment manager details, and compliance framework
Legal Documentation — Drafting the OFC's instrument of incorporation, offering documents, and investment management agreement
Director Appointment — Appointing at least two directors (including at least one independent non-executive director)
Custodian Engagement — Appointing an eligible custodian (must be an authorised financial institution or SFC-licensed corporation)
SFC Incorporation — SFC approval and incorporation of the OFC
Post-Incorporation Setup — Bank account opening, service provider onboarding, AML/KYC implementation
Subsidy Application — Applying for the government OFC subsidy scheme

What Are the Ongoing OFC Compliance Requirements?

Post-incorporation, OFCs must maintain:

Annual Audit — By a Hong Kong CPA firm registered with the Hong Kong Institute of Certified Public Accountants (HKICPA)
SFC Reporting — Periodic compliance reports to the SFC
Custodian Oversight — The custodian must independently verify fund assets and transactions
Board Meetings — Regular board meetings with proper minutes and governance documentation
Investor Reporting — NAV calculations, capital account statements, and periodic investor reports
AML/CFT Compliance — Ongoing anti-money laundering monitoring for investor onboarding
FATCA/CRS Reporting — As a financial institution, OFCs have FATCA and CRS obligations

What is the Difference Between OFC and LPF?

OFC (Open-ended Fund Company) and LPF (Limited Partnership Fund) are two common fund structures in Hong Kong. Their main differences are as follows: In terms of regulation, OFC is regulated by the SFC, while LPF is registered with the Companies Registry, but if the GP manages regulated assets, it still needs an SFC licence. In terms of structure, OFC is a company limited by shares, while LPF is a limited partnership. As for investor liability, both offer limited liability. In terms of suitability, OFC is suitable for public and private funds and mutual funds, while LPF is suitable for private equity and venture capital funds. As for minimum requirements, OFC requires at least 2 directors (including 1 independent director), while LPF requires at least 1 GP and 1 LP. Regarding custodians, OFC must have a custodian, while LPF has no mandatory requirement. On tax, both can enjoy the unified fund exemption. As for government grants, OFC is eligible for grants (up to HK$300,000 for public funds and HK$150,000 for private funds), while LPF is not. In terms of SFC regulation, OFC is directly regulated, while LPF itself is not regulated, but its GP needs a licence if it manages regulated assets.

How long does it take to incorporate an OFC?

Once all documentation is complete, SFC incorporation typically takes 1 to 2 months. The full process — including legal drafting, director appointment, and custodian engagement — takes approximately 2 to 4 months from start to finish.

What is the OFC government subsidy and how do I apply?

The Hong Kong government subsidises OFC setup costs, capped at HK$300,000 per public OFC and HK$150,000 per private OFC. The subsidy is limited to one OFC per investment manager, administered by the SFC, and covers legal fees, accounting fees, and other professional costs incurred within 3 years of incorporation.

Can a private OFC invest in private companies?

Yes. Since the 2021 amendments to the Securities and Futures (Open-ended Fund Companies) Rules, OFCs can invest in private companies. This makes the OFC structure attractive for private equity and venture capital funds previously limited to offshore structures.

Does an OFC need a custodian?

Yes. Every OFC must appoint an eligible custodian — either a Hong Kong authorised financial institution (bank) or an SFC-licensed corporation. The custodian holds fund assets independently and provides an additional layer of investor protection.

What is the difference between a private OFC and a public OFC?

A private OFC is incorporated by the SFC but does not require SFC authorisation for public offering — it can only be offered to professional investors or under private placement exemptions. A public OFC requires SFC authorisation and can be offered to the general public, subject to prospectus and ongoing disclosure requirements.

Can an existing offshore fund redomicile to Hong Kong as an OFC?

Yes. Since November 2021, the SFC allows existing funds from qualifying jurisdictions (including Cayman Islands) to redomicile to Hong Kong as OFCs. CityLinkers can manage the entire redomiciliation process, ensuring continuity of the fund's operations and tax positions.